The East African region recorded the largest market share of the continent’s alternative finance market in 2015, accounting for 41 per cent of total African market share compared to 24 per cent for West Africa and 19 per cent for Southern Africa.
Generally, the market grew by 59 per cent in 2015 to $242 million, according to a new report, “Africa & Middle East Alternative Finance Benchmarking Survey”.
Alternative finance market refers to financial channels and instruments that have emerged outside of the traditional finance system, such as regulated banks and capital markets.
The study report released last week by the Cambridge Centre for Alternative Finance (CCAF), in partnership with Energy 4 Impact, UKAid and CME Group Foundation is the first survey focusing on Africa and the Middle East. Similar studies have focused on other regions.
It also indicates that alternative finance markets in African and the Middle East totaled over $475 million between 2013-2015, mainly raised through equity crowd-funding and online microfinance rather than the peer-to-peer lending seen in more developed markets. The survey indicates that online micro-finance was the leading model of alternative finance sourcing in Africa accounting for 42 per cent of total market value, while peer-to-peer business lending was recorded at only 17 per cent of total market volume in Africa.
Commenting on the findings, Simon Collings, the director for learning and innovation at Energy 4 Impact, said the rapid growth of crowd-funding globally has led some in the development sector to see the crowd as a potential solution to the funding challenges innovative businesses face when they try to serve the ‘bottom of the pyramid.’ Energy 4 Impact is a non-profit organisation that supports local businesses that provide energy access to off-grid communities in Africa.
The survey was based on data collected from 70 alternative finance platforms operating across 46 countries in Africa and 12 in the Middle East and captured about 85 per cent of market activity.
Israel was by far the largest market across the surveyed regions, with a total of nearly $125 million in 2015, while Kenya topped in Africa with over $16 million, South Africa had $15 million, Nigeria ($8 million), Cameroon ($7 million), Ghana and Uganda ($5 million each), while Rwanda recorded $4 million.